Let me tell you a little secret about myself… I’m not good at math! Luckily for me, higher level math is not required for success in personal finance.
Oh, I have a firm handle on the basics – addition, subtraction, multiplication, division, fractions & exponents. However, the higher level stuff like algebra, calculus, and trigonometry were challenging for me in high school. And when I got to university, I took my two required math courses and never looked back.
Truth be told, my mastery of mathematical concepts ends around grade 11 mathematics, maybe even grade 10. Since then, I’ve been limping along with the basics… and amassing a sizeable net worth along the way. Luckily for me, I didn’t need the higher level math skills in order to start investing for my future.
If you want the skills, go get them.
For my part, you need not master those skills unless one of the following two things are true:
- you want to; or
- you need them for your desired career
Had I wanted to pursue a career in science or finance then I would have had to put my nose to the grindstone in order to acquire higher level math skills. The STEM – science, technology, engineering, math – careers required a mastery of math that I just don’t have.
Thankfully, I didn’t need to master algebra, calculus, and trigonometry to become adept at personal finance. And since I didn’t particularly enjoy high school math, I found a way to build the life I want without having to take many more math courses after leaving secondary school. I’m not saying my decision is the right one for everyone so please do what you think is best for your particular circumstances. If you need higher level math skills to build the life you want for yourself, then go and get them post-haste.
Is it easy to do?
Sometimes I think people are intimidated by personal finance because they weren’t good at math in school either. I’m here to tell you that there are three mandatory ingredients to building wealth over a lifetime: an income, an automatic transfer, and opportunity to invest.
For my part, I pursued investment opportunities offered in the stock exchange. I used to invest in mutual funds, but then I learned about management expense ratios and switched my investments to exchange traded funds. ETFs are much cheaper than mutual funds. Over a very long investment horizon, lower MERs mean that I keep more money in my pocket.
Some people invest in themselves by starting a business. Some people build portfolios of rental real estate. I think those are great options, but they just weren’t ones that I pursued. Neither of those options necessarily require a mastery of higher level math skills. Successfully running a rental property portfolio requires a mastery of ensuring that the money coming in from rents is higher than the money going out for expenses. A Ph.D in calculus isn’t going to be required to be a successful landlord.
In any event, an income, an automatic transfer, and the opportunity to invest are the three main ingredients of the secret sauce of personal finance.
Is the formula simple? You better believe it is! If you have all three, then you’re in a position to increase your wealth.
Most people can master personal finance with the math concepts that they learn before junior high. I’d always felt bad about my high school math achievements. It was the one class where I struggled, and I never felt smart enough. In spite of his, I’m pretty okay with how I’m doing today.
Special Advice to the Young…
If you happen to be a young person reading this post, then I would encourage you to work hard at mastering math and getting those skills under your belt as soon as possible. Remember how I said that an income is part of the secret sauce?
STEM-careers pay higher incomes. It’s a reality. STEM careers are an avenue to increasing your odds that you’ll earn more than the median income. The higher your income, the larger your opportunity to build wealth. You can choose to save a higher percentage of your income when your income is large. When you’re trying to live on the median income, there’s not as much opportunity to save money. Generally, less money invested means slower growth of your money over time.
You might not think that’s fair, but I’m not here to argue about fairness. I want you to keep your options open by getting the highest grades that you can in the area of math. Doctors make more than cashiers. Pharmacists and engineers earn more than maintenance and daycare workers. I’m sure you can think of other examples. I’m not debating the necessity of each type of work to the functioning of society. I’m just pointing out the fact that STEM-careers pay more than non-STEM careers.
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Weekly Tip: Learn to use the word “No” when people ask you for money. You need not be rude, aggressive, or sarcastic. Practice saying “No” in a polite but firm tone. Doing so will ensure that you’re confident and calm when turning down someone’s request for your money.